Societe Generale rose as much as 5.9 percent in Paris
trading after saying net income rose to 955 million euros ($1.27
billion), exceeding the 668 million-euro average forecast of six
analysts surveyed by Bloomberg. Revenue at the corporate- and
investment-banking unit rose 38 percent from the previous year.

Societe Generale, led by Chief Executive Officer Frederic Oudea, is selling assets and has cut hundreds of jobs in
investment banking to comply with stricter capital rules
designed to ensure the financial crisis of 2008 is not repeated.
In May, it announced 900 million euros of cost reductions
through 2015 to restore profitability.

“What we are doing in terms of profitability and capital
ratios is really going in the right direction at a quick pace,”
Oudea said in a Bloomberg Television interview after the
earnings were published. The bank’s core Tier 1 capital ratio
will be “close to” 10 percent by year’s end and a rights issue
is “not at all” needed, he said.

Leverage Prediction

Societe Generale said its leverage ratio, or common equity
as a proportion of total assets, will exceed 3 percent by the
end of the year, the minimum level set by global regulators for
the start of 2018, under the current understanding of Basel
committee rules. It didn’t provide a figure for the ratio should
the calculations be enhanced as many analysts predict.

The core equity Tier 1 ratio under Basel III, another key
measure of banks’ financial strength that is based on risk-weighting of assets, was 9.4 percent at the end of June, a gain
of 73 basis points, or 0.73 percentage point, from the end of
March, Societe Generale said. The ratio will increase to more
than 9.5 percent by year-end, it said.

Regulators are questioning the risk weightings banks apply
to their assets, which are typically set by the lenders’ own
models, and calling for inclusion of the more simplified measure
of leverage that ignores risk.

BNP, which is planning to expand in markets such as Germany
and the Asia-Pacific region, had a leverage ratio of 3.4 percent
at the end of June, based on core Tier 1 capital.

Investment Banking

Net income at Societe Generale’s corporate- and investment-bank surged to 374 million euros from 131 million euros in the
second quarter of last year, beating the 354 million-euro
average estimate of five analysts. Global-markets revenue rose
27 percent to 1.2 billion euros in the period.

Societe Generale’s equities-trading business benefited from
“strong revenues on flow equity derivatives” in Asia and from
“sustained commercial activity on structured products,” it
said in a presentation.

Trading in fixed-income, currencies and commodities had
seen “growing demand from retail and institutional clients on
structured products,” the bank said.

Private Banking

Societe Generale had 84 million euros in second-quarter net
income from its private banking and investment-management
services unit, compared with a 129 million-euro loss in the
previous year, when it booked a 200 million-euro markdown on a
U.S. asset-management unit.

France’s three largest banks, which also include Credit
Agricole SA (ACA), last year shrank risk-weighted assets by a combined
128 billion euros and cut thousands of investment-banking jobs
to comply with stricter international capital and liquidity
requirements.

Now French lenders are seeking to counter the impact of the
European economic slump. President Francois Hollande’s
government is prodding banks to lend more to help France emerge
from a recession, while cutting them some slack on other fronts.
French banks were spared a split of lucrative investment-banking
activities from other operations as lawmakers passed a bill last
month to segregate proprietary trading, the first such move in
Europe.

France Profit

Net income at Societe Generale’s French retail banking unit
fell 11 percent to 319 million euros in the second quarter, it
said. That surpassed the 301 million-euro average estimate of
five analysts. Revenue rose 1.6 percent to 2.07 billion euros
while provisions for doubtful loans were at 274 million euros, a
29 percent increase from a year ago, it said.

Societe Generale (GLE)’s second-quarter net income from Russia
was 10 million million euros, rebounding from a year-earlier
loss of 271 million euros caused by a writedown at its Moscow-based unit OAO Rosbank (ROSB), the bank said. Societe Generale serves
about 5 million Russian clients, its second-biggest market after
France, and is among a declining number of Western banks keeping
a presence in Russia after rivals such as Barclays Plc (BARC) and HSBC
Holdings Plc (HSBA) left.

In June, Societe Generale pledged to keep growing its
Russian business as it sought to move beyond the May arrest of
Rosbank’s former head on bribery charges. It said in June that
it aims to achieve return on equity of more than 15 percent in
Russia by 2015.

Societe Generale’s corporate center, which includes the
group’s property portfolio, its banking and industrial equity
holdings and treasury functions, had a net loss of 78 million
euros compared with a year-earlier 138 million-euro profit, the
bank said. The division booked 100 million euros in litigation
provisions, it said.